Filed 8/5/19

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

KWANG K. SHEEN,

Plaintiff and Appellant,

v.

WELLS FARGO BANK, N.A.

Defendant and Respondent.

 B289003

 (Los Angeles County

 Super. Ct. No. BC631510)

APPEAL from a judgment of the Superior Court of Los 

Angeles County, Robert L. Hess, Judge. Affirmed.

Los Angeles Center for Community Law and Action, Noah 

Grynberg for Plaintiff and Appellant. 

Kutak Rock, Jeffrey S. Gerardo, and Steven M. Dailey for 

Defendant and Respondent.

__________________________
2

Homeowners in mortgage trouble may try to negotiate a 

better deal. If mortgage modification negotiations fail and the 

borrower falls behind, the lender may foreclose, sell the house, and 

evict the homeowner. In a nutshell, this happened to borrower 

Kwang Sheen with his lender Wells Fargo Bank, N.A. (Wells). 

Sheen sued Wells in tort for negligent mortgage modification and 

other claims. The trial court sustained Wells’s demurrer, partly 

because Wells did not owe Sheen a duty in tort during contract

negotiation.

The issue of whether a tort duty exists for mortgage 

modification has divided California courts for years. The California 

Supreme Court has yet to resolve this division. We must take sides.

We join with the old rule: no tort duty during contract 

negotiations. Our small contribution to this extensive debate is to 

use the general approach of the recent Supreme Court decision in 

Southern California Gas Leak Cases (2019) 7 Cal.5th 391 (Gas Leak 

Cases). The Gas Leak Cases decision was not about mortgage 

modifications, but it gives us guiding sources of law about whether 

to extend tort duties when, as here, there is no personal injury or 

property damage. Seeking wisdom, the Supreme Court considered 

decisions from other states as well as the Restatement of Torts. We 

do likewise. 

These sources of law decisively weigh against extending tort 

duties into mortgage modification negotiations. The majority of 

other states are against it, and the most recent Restatement 

counsels against this extension because other bodies of law—breach 

of contract, negligent misrepresentation, promissory estoppel, 

fraud, and so forth—are better suited to handle contract negotiation 

issues. We therefore affirm.
3

I

We recount Sheen’s allegations from the operative pleading: 

his second amended complaint, which was skillfully drafted and is 

26 pages long. Sheen attached no documents to this unverified 

complaint. In the trial court, able counsel represented Sheen. The 

same counsel appeared for oral argument in this court.

Sheen’s complaint tells of a homeowner who borrowed money 

on his house three times, defaulted on all three loans after the 

subprime meltdown, sought loan modifications, declared 

bankruptcy, and emerged from bankruptcy. In the end, Sheen lost 

his house to foreclosure.

The complaint begins with Sheen’s home purchase in 1998. 

Sheen got a $500,000 loan secured by a deed of trust. This first 

loan is not at issue here. 

In 2005, Sheen obtained two junior loans from Wells, in the 

amounts of $167,820 and $82,037. Sheen had financial troubles 

during the 2008 financial crisis and missed payments on the second 

and third loans. In September 2009, Wells recorded a notice of 

default on the second loan. The beneficiary of the first loan 

recorded a notice of default a few months later. 

Sheen sought to modify all his home loans. Sheen’s previous 

representative contacted Wells in January 2010 seeking 

forbearance and modifications to the second and third loans. Sheen 

himself submitted loan modification requests about both loans on 

January 29, 2010. 

Wells sent Sheen two letters on March 17, 2010. One letter 

concerned the second loan. It stated Wells was accelerating Sheen’s 

payments due under the second loan. Sheen alleges this letter led 

him to believe his mortgages were converted into unsecured loans 

because the letter stated Wells may “plac[e] your account with an 

outside collection agency.” Around this time, a Wells representative 
4

called Sheen’s wife and told her there would be no foreclosure sale. 

Instead, the representative allegedly explained, Wells was simply 

trying to recover money through standard collections practices. 

Sheen received an additional letter from Wells on April 23, 

2010 concerning the second loan in which Wells offered to charge off 

50% of the balance if Sheen and Wells could come to a satisfactory 

arrangement. This letter reinforced Sheen’s belief Wells had 

converted his mortgage into an unsecured loan because the letter 

did not explicitly mention a possible foreclosure sale. 

In November 2010, Wells sold Sheen’s defaulted second loan 

in the secondary market for distressed mortgage debt. After the 

second loan passed through two investment entities, Mirabella 

Investments Group, LLC (Mirabella) ultimately bought it in 

November 2013. 

Meanwhile, Argent Mortgage Company, LLC, the holder of 

the first loan, recorded a notice of trustee sale in April 2012. Sheen 

succeeded in modifying this loan and Argent rescinded its notice of 

default in August 2013. 

Wells ultimately cancelled the third loan in March 2014. 

Mirabella moved forward on the second loan and recorded a 

notice of default in April 2014. Sheen began making modification 

requests to Mirabella in August 2014, but Mirabella did not tell 

Sheen whether it would modify this loan. Instead Mirabella wrote 

Sheen in August 2014 stating it sold its servicing rights for the 

second loan to FCI Lender Services, LLC (FCI). 

Sheen made another modification request directly to FCI that 

month, but it rejected the application because Sheen had too little 

income. Ten days later Sheen filed for Chapter 7 bankruptcy relief. 

Sheen made two more requests for modification while his 

bankruptcy was pending. FCI rejected each of these applications, 

again citing Sheen’s low income. 
5

Sheen made a third modification request in October 2014 

with the assistance of a legal aid society representative. FCI 

allegedly informed this representative it considered Sheen’s second 

loan to no longer be in “active foreclosure.” Sheen also contacted 

Mirabella directly. Mirabella allegedly told Sheen and his wife it 

would consider modification in lieu of foreclosure. 

The bankruptcy court dismissed Sheen’s bankruptcy case on 

October 24 and vacated the bankruptcy stay. Sheen got a phone 

call five days later that his home would be sold that day. Surprised, 

Sheen immediately followed up with FCI, which confirmed the 

news. 

Mirabella bought Sheen’s home at the auction later that day. 

Mirabella then sold the home to Equity Investments Group, Inc. 

and Compass Alternative Investments, LLC. Sheen then lost an 

unlawful detainer action. 

II

We describe this case’s procedural posture.

Sheen sued Wells and others in 2016. Sheen’s first count was 

for negligence. He alleged Wells owed him a duty of care to process, 

review, and respond carefully and completely to the loan 

modification applications he submitted to Wells. Additionally, 

Wells allegedly owed him a duty to refrain from engaging in unfair 

and offensive business practices that confused Sheen and prevented 

him from pursuing all options to avoid foreclosure. Sheen alleged 

Wells breached its duty by failing to respond to his applications, by 

sending two letters suggesting loans had been modified and his 

house would not be sold, by phoning his wife to say there would be 

no foreclosure sale of his home, by confirming Sheen’s 

interpretation of these letters with a further letter that read like it 

was sent in connection with an unsecured debt rather than a 
6

secured mortgage loan, and by assigning a loan without notifying 

the assignor that Sheen’s modification application was pending.

Sheen also sued Wells for intentional infliction of emotional 

distress, alleging Wells knew he was in a state of financial 

difficulty. Yet Wells failed to respond to his modification 

application, sent him misleading letters, and suggested to Sheen’s 

wife the house would not be sold in foreclosure. Wells further 

confirmed Sheen’s understanding of the letter with a further letter 

that made no mention of a foreclosure sale. These alleged actions, 

Sheen claimed, stated a claim for intentional infliction of emotional 

distress. 

Sheen’s final claim against Wells was for violating the unfair 

competition law, Business & Professions Code section 17200 et seq. 

(section 17200). Sheen alleged that, under section 17200, Wells’s 

acts violated the laws against negligence and intentional infliction 

of emotional distress. Sheen claimed Wells’s conduct had been 

unfair because it was immoral, unethical, and unscrupulous. 

Finally, Sheen alleged Wells’s conduct was fraudulent because it 

was likely to have deceived members of the public.

Wells demurred to Sheen’s second amended complaint.

Sheen’s counsel stressed to the trial court that “we are not 

alleging fraud, and we are not alleging breach of contract . . . .” 

Rather, Sheen limited his claims against Wells to three counts 

described above: negligence, intentional infliction of emotional 

distress, and violations of section 17200.

The trial court sustained Wells’s demurrer against Sheen’s 

three causes of action without leave to amend. The court dismissed 

the negligence cause of action because Sheen had not pleaded facts 

supporting a tort duty of care by Wells to Sheen regarding loan 

modification. The court dismissed the intentional infliction of 

emotional distress claim for failure to plead outrageous conduct. 
7

And the court dismissed Sheen’s section 17200 claim for want of an 

underlying claim. The court entered judgment for Wells.

Wells’s successful demurrer did not affect Sheen’s suit against 

other defendants, which proceeded. Sheen appealed the trial court’s 

judgment for Wells. Wells is the lone defendant in this court, and 

Sheen is the lone plaintiff. 

III

The trial court was right to sustain the demurrer.

We independently review an order dismissing a complaint. 

(Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494, 1500–1501.) 

We begin by noting the claims Sheen did not bring. Sheen did 

not sue Wells for common law:

1. Breach of contract, 

2. Negligent misrepresentation, 

3. Promissory estoppel, or 

4. Fraud. 

Neither did Sheen claim a statutory breach of the following:

1. California Foreclosure Prevention Act (Civ. Code, 

§ 2924 et seq.), 

2. California Homeowner Bill of Rights (Civ. Code, § 2920 

et seq.), 

3. Perata Mortgage Relief Act (Civ. Code, § 2923.5), 

4. Real Estate Settlement Procedures Act (12 U.S.C. 

§ 2601 et seq.), 

5. Home Affordable Modification Program (12 U.S.C. 

§ 5201 et seq.), or

6. Truth in Lending Act (15 U.S.C. § 1601 et seq.).

These omissions were well counseled and not inadvertent. 

During oral argument on the demurrer, Sheen’s counsel—an expert 

in this field of law—stressed to the trial court the suit’s limited and 

precisely targeted nature. The implication is Sheen did not attempt 
8

these other theories because, in his attorney’s estimation, they did 

not or could not offer him the type of relief he wanted. So Sheen 

turned to common law negligence to fill the gap.

Sheen told the trial court he was bringing his negligence 

claim on an Alvarez and Daniels theory. (See Alvarez v. BAC Home 

Loans Servicing, L.P. (2014) 228 Cal.App.4th 941 (Alvarez); Daniels 

v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150 

(Daniels).) 

We respectfully disagree with Alvarez and Daniels. In our 

view, the trial court correctly sustained Wells’s demurrer because a 

lender does not owe a borrower a tort duty of care during a loan 

modification negotiation.

The 2014 Alvarez decision sharpened a conflict in California’s 

state courts. Alvarez ruled lenders do owe borrowers a duty of care 

in tort during mortgage modification negotiations. The Alvarez

opinion rejected the 2013 decision in Lueras v. BAC Home Loans 

Servicing, LP (2013) 221 Cal.App.4th 49, 67 (Lueras), which held a 

lender does not owe a borrower a common law duty “to offer, 

consider, or approve” a loan modification. (See also Nymark v. 

Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1096 

[“Liability to a borrower for negligence arises only when the lender 

‘actively participates’ in the financed enterprise ‘beyond the domain 

of the usual money lender.’”].) 

The Alvarez opinion stressed that “the bank holds ‘all the 

cards’” and that borrowers are captive, with virtually no bargaining 

power. (Alvarez, supra, 228 Cal.App.4th at p. 949.) The opinion 

noted the “moral imperative that those with the controlling hand be 

required to exercise reasonable care in their dealings with 

borrowers seeking a loan modification.” (Ibid.) The decision 

reasoned recent legislation demonstrated “‘a rising trend to require 

lenders to deal reasonably with borrowers in default to try to 
9

effectuate a workable loan modification.’” (Id. at p. 950.) In careful 

detail, Alvarez explained why it took a view conflicting with Lueras. 

(Id. at pp. 947–951.) 

This conflict persists. The Daniels court followed Alvarez, 

while other courts have aligned with Lueras. The unpublished 

Fourth Appellate District decision in Lacken v. Select Portfolio 

Servicing, Inc. (Feb. 20, 2018 G053997) 2018 Cal.App.Unpub. Lexis 

1163, pp. *18–*22, 2018 WL 948198, pp. *6–*8, reviewed the debate 

and continued the rift, as do numerous federal decisions. (See

Anderson v. Deutsche Bank Nat. Trust Co. Americas (9th Cir. 2016) 

649 Fed.Appx. 550, 552; Deschaine v. IndyMac Mortgage Services

(9th Cir. 2015) 617 Fed.Appx. 690, 693; Hackett v. Wells Fargo Bank 

(C.D. Cal. Mar. 5, 2018, 2:17-CV-7354) 2018 U.S.Dist. Lexis 38412, 

pp. *22–*26, 2018 WL 1224410, pp. *8–*9; Cruz v. Freedom 

Mortgage Corporation (C.D.Cal. May 3, 2018, CV 18-1438) 2018 WL 

6118532, pp. *5–*6.) 

Our list of cases in conflict is hardly exhaustive but the extent 

and duration of this conflict shows the governing test does not yield 

predictable and uniform results. 

That governing test stems from Biakanja v. Irving (1958) 49 

Cal.2d 647 (Biakanja). How one views this test apparently depends 

on the beholder. (Compare Alvarez, supra, 228 Cal.App.4th at pp. 

948–951 [Biakanja dictates duty] with Lueras, supra, 221 

Cal.App.4th at p. 67 [Biakanja dictates no duty].) Our view is that 

Lueras and allied opinions correctly analyzed the Biakanja factors. 

Rather than rely on this debatable test alone, we seek added 

certainty by turning to the latest word from the California Supreme 

Court in its Gas Leak Cases opinion. This case concerned the issue 

of tort duty, albeit not in the mortgage modification context. 

Rather, Gas Leak Cases arose when a utility accidentally let 

methane escape, which caused nearby businesses to lose money. 
10

Like Sheen, these businesses suffered neither personal injury nor 

property damage. Their losses were purely economic. The question 

in Gas Leak Cases was whether the utility owed these businesses a 

tort duty of care. The High Court said no. The economic loss rule 

means there is no such tort duty.

The Gas Leak Cases quoted a legal test called the “Rowland 

factors” that derived from and is nearly identical to the Biakanja

test. (See Gas Leak Cases, supra, 7 Cal.5th at p. 398 [citing 

Rowland v. Christian (1968) 69 Cal.2d 108, 113, which in turn cited 

Biakanja]; id. at p. 400 [analyzing and applying Biakanja]; id. at p. 

401 [the Biakanja test involved “a subset of the Rowland factors”].) 

But the High Court eschewed “rote application of these separate socalled Rowland factors” and instead took a comprehensive look at 

the total considerations at play. (Id. at p. 399.) 

One fundamental consideration was that economic losses 

flowing from “a financial transaction gone awry” are “‘primarily the 

domain of contract and warranty law or the law of fraud, rather 

than of negligence.’” (Gas Leak Cases, supra, 7 Cal.5th at p. 402.) 

Here we have a financial transaction gone awry and nothing more: 

Sheen suffered neither personal injury nor property damage.

The Gas Leak Cases decision also considered the views of 

other jurisdictions and of the Restatement of Torts. (Gas Leak 

Cases, supra, 7 Cal.5th at pp. 403–407.) We follow this lead.

Decisions from other jurisdiction form a consensus that “cuts 

sharply against imposing a duty of care to avoid causing purely 

economic losses in negligence cases like this one . . . .” (Gas Leak 

Cases, supra, 7 Cal.5th at p. 403.) 

Courts in at least 23 states have refused to impose tort duties 

on lenders about loan modifications. (See Prickett v. BAC Home 

Loans (N.D.Ala. 2013) 946 F.Supp.2d 1236, 1244–1245 [applying 

Alabama law]; Miller v. Bank of New York Mellon (Colo.Ct.App. 
11

2016) 379 P.3d 342, 345–348; Burdick v. Bank of America, N.A.

(S.D.Fla. 2015) 99 F.Supp.3d 1372, 1377–1378 [applying Florida 

law]; Chung v. JPMorgan Chase Bank, N.A. (N.D.Ga. 2013) 975 

F.Supp.2d 1333, 1344–1346 [applying Georgia law]; Wigod v. Wells 

Fargo Bank, N.A. (7th Cir. 2012) 673 F.3d 547, 567–568 [applying 

Illinois law]; Jaffri v. JPMorgan Chase Bank, N.A. (Ind.Ct.App. 

2015) 26 N.E.3d 635, 638; Legore v. OneWest Bank, FSB (D.Md. 

2012) 898 F.Supp.2d 912, 918–919 [applying Maryland law]; Afridi 

v. Residential Credit Solutions, Inc. (D.Mass. 2016) 189 F.Supp.3d 

193, 199 [applying Massachusetts law]; Polidori v. Bank of America, 

N.A. (E.D.Mich. 2013) 977 F.Supp.2d 754, 763–764 [applying 

Michigan law]; Wivell v. Wells Fargo Bank, N.A. (8th Cir. 2014) 773 

F.3d 887, 900 [applying Missouri law]; Anderson v. ReconTrust 

Company, N.A. (Mont. 2017) 390 Mont. 12, 20; McGee v. 

CitiMortgage (D.Nev. May 31, 2013, 2:12-CV-2025) 2013 U.S.Dist. 

Lexis 76675, pp. *16–*17, 2013 WL 2405301, p. *6 [applying 

Nevada law]; Schaefer v. Indymac Mortgage Services (1st Cir. 2013) 

731 F.3d 98, 103–107 [applying New Hampshire law]; Patetta v. 

Wells Fargo Bank, N.A. (D.N.J. Sep. 10, 2009, 3:09–CV–2848) 2009 

U.S.Dist. Lexis 82338, pp. *30–*32, 2009 WL 2905450, p. *8 

[holding no fiduciary duty exists between borrowers and lenders 

that would support non-contractual liability under New Jersey law]; 

Dooley v. Wells Fargo Bank, Nat. Ass’n (S.D.Ohio 2013) 941 

F.Supp.2d 862, 866–867 [applying Ohio law]; Medici v. JP Morgan 

Chase Bank, N.A. (D.Or. Jan. 15, 2014, 3:11–CV–00959) 2014 

U.S.Dist. Lexis 4928, pp. *9–*10, 2014 WL 199232, pp. *3–*4; 

Bordoni v. Chase Home Finance LLC (E.D.Pa. 2019) 374 F.Supp.3d 

378, 384–386 [applying Pennsylvania law]; Henderson v. Wells 

Fargo Bank, N.A. (N.D.Tex. 2013) 974 F.Supp.2d 993, 1010–1012 

[applying Texas law]; Needham v. Fannie Mae (D.Utah 2012) 854 

F.Supp.2d 1145, 1153 [applying Utah law]; Parks v. BAC Home 
12

Loan Servicing, LP (E.D.Va. 2011) 825 F.Supp.2d 713, 716 

[applying Virginia law]; Srok v. Bank of Am. (E.D.Wis. Nov. 6, 2015, 

15-CV-239) 2015 U.S.Dist. Lexis 151025, pp. *17–*21, 2015 WL 

6828078, pp. *7–*8 [applying Wisconsin law]; McNeely v. Wells 

Fargo Bank, N.A. (S.D.W.Va. Dec. 10, 2014, 2:13-CV-25114) 2014 

U.S.Dist. Lexis 170784, pp. *12–*20, 2014 WL 7005598, pp. *5–*7; 

Powell v. Ocwen Loan Servicing, LLC (D.Wyo. Aug. 7, 2014, 14-CV113) 2014 U.S.Dist. Lexis 187163, pp. *12–*16, 2014 WL 11498232, 

pp. *5–*6 [applying Wyoming law].)

This 23-state bloc is the dominant position, but there may be 

a contrary minority view. An unpublished 2014 federal district 

court opinion reported two dissenting cases: one unpublished 

decision from Arizona and another from Mississippi. (See Powell v. 

Ocwen Loan Servicing, LLC, supra, 2014 U.S.Dist. Lexis 187163, p. 

*13, 2014 WL 11498232, pp. *5–*6 [citing McIntosh v. IndyMac 

Bank, FSB (D.Ariz. Jan. 10, 2013, CV-11-1805) 2013 U.S.Dist. Lexis 

3959, pp. *6–*7, 2013 WL 135315, p. *2; Montgomery v. 

CitiMortgage, Inc. (S.D.Miss. 2013) 955 F.Supp.2d 640, 649–650 

(Montgomery)].) 

So perhaps Arizona and Mississippi support Alvarez. We are 

unsure. 

The pertinent law in Arizona appears to be a bit of a mixed 

bag. (Compare Snyder v. HSBC Bank, USA, N.A. (D.Ariz. 2012) 

913 F.Supp.2d 755, 775–776 [noting relevant Arizona law “is not 

well-settled”] with id. at p. 776 [concluding bank owed no duty to 

borrower] and Zazueta v. Nationstar Mortg., LLC (D.Ariz. Apr. 1, 

2014, (CV-13-1415), 2014 U.S.Dist. Lexis 189627, pp. *16–18, 2014 

WL 12527708, pp. *6–*7 [apparently holding no tort duty exists 

between a financial institution and a borrower].)

We have similar uncertainty about the law of Mississippi. 

(Compare Poppelreiter v. GMAC Mortg., LLC (N.D.Miss. Dec. 7, 
13

2011, 1:11CV008) 2011 U.S.Dist. Lexis 140957, pp. *8–*9, 2011 WL 

6100440, p. *3 [relationship between a mortgagor and mortgagee is 

not a fiduciary one but rather an arms-length business transaction 

involving a normal debtor-creditor relationship] with Montgomery, 

supra, 955 F. Supp.2d at 649 [under Mississippi law a negligence 

claim may be founded on the breach of a legal duty arising from a 

contract between parties].)

Our uncertainty about Arizona and Mississippi does not 

matter. Whether the tally is 23 to zero or 23 to two, the 

overwhelming supermajority of states disagree with Alvarez. 

The dominant position is there is no tort duty during 

mortgage modification negotiations. This consensus is “a striking 

degree of unanimity.” (Gas Leak Cases, supra, 7 Cal.5th at p. 407.) 

It weighs against Alvarez. 

Turning next to the Restatement of Torts, it supports Lueras

and opposes Alvarez, as we explain.

There is “[l]ittle wonder” the Restatement “takes the 

dominant view. Although acknowledging that ‘[d]uties to avoid the 

unintentional infliction of economic loss’ exist in certain recognized 

circumstances, the latest Restatement provides that there is ‘no 

general duty to avoid the unintentional infliction of economic loss 

on another.’ (Rest.3d, Torts, Liability for Economic Harm (Tent. 

Draft. No. 1, Apr. 4, 2012) § 1 (Restatement T.D. 1).)” (Gas Leak 

Cases, supra, 7 Cal.5th at p. 407.) 

Specifically, the most recent Restatement explains there can 

be no liability in tort for economic loss caused by negligence in the 

performance or negotiation of a contract between its parties. 

(Rest.3d Torts, Liability for Economic Harm (Tent. Draft No. 1, Apr. 

4, 2012) § 3.) Certain exceptions exist but do not apply here.

The Restatement gives its rationale. “When a party’s 

negligence in performing or negotiating a contract causes economic 
14

loss to the counterparty, remedies are determined by other bodies of 

law: principally the law of contract, though sometimes also the law 

of restitution or relevant statutes. The law of contract and the law 

of restitution have been developed for the specific purpose of 

allocating economic losses that result from the negotiation and 

performance of contracts. They provide a more extensive and finely 

tuned apparatus for the purpose than the law of torts, which has 

developed primarily to address injuries that occur outside 

contractual relationships. [¶] [This approach] serves several 

purposes. When a dispute arises, the rule protects the bargain the 

parties have made against disruption by a tort suit. Seen from an 

earlier point in the life of a transaction, the rule allows parties to 

make dependable allocations of financial risk without fear that tort 

law will be used to undo them later. Viewed in the long run, the 

rule prevents the erosion of contract doctrines by the use of tort law 

to work around them. The rule also reduces the confusion that can 

result when a party brings suit on the same facts under contract 

and tort theories that are largely redundant in practical effect.” 

(Rest.3d Torts, Liability for Economic Harm (Tent. Draft No. 1, Apr. 

4, 2012) § 3, com. b., p. 22.)

The Restatement rebuts factors that may have contributed to 

Alvarez’s result. “Pressure to find a tort claim arises because the 

stakes are high and the plaintiff’s position is sympathetic . . . . But 

if denying relief to the plaintiff seems to produce an injustice on 

those grounds, a better response is to reconsider the application of 

. . . the other doctrines of contract law that are responsible for the 

result. Using tort law to bypass those doctrines weakens them and 

retards their development. It also interferes with the ability of 

others to make reliable agreements in the future. In the 

alternative, a result unappealing on its equities may call for a 

statutory solution. Statutes can impose responsibility on sellers for 
15

certain risks without distorting widely applicable legal principles to 

reach the desired outcome. . . . When two parties negotiate over a 

contract, the amount of care they are expected to show for each 

other’s interests will often be unclear or significantly less than the 

care expected in a situation involving strangers or the risk of 

physical injury. That is among the reasons why the duties of care 

between parties who negotiate contracts are not governed by the 

law of tort.” (Rest.3d Torts, Liability for Economic Harm (Tent. 

Draft No. 1, Apr. 4, 2012) § 3, com. d., pp. 27–28.)

The Restatement is definitive: it “eliminates tort claims 

based on a defendant’s negligent statements of intent to make a 

contract, predictions about the likelihood of a contract, or mistaken 

suggestions that a contract has been formed.” (Rest.3d Torts, 

Liability for Economic Harm (Tent. Draft No. 1, Apr. 4, 2012) § 3, 

com. e., p. 29.)

“Detailed doctrines in the law of contract, of restitution, and 

of estoppel have developed to provide relief in such cases where 

necessary. If those bodies of law fall short, the appropriate 

response again is to reform them, not to use the law of tort to 

supply their deficiencies.” (Rest.3d Torts, Liability for Economic 

Harm (Tent. Draft No. 1, Apr. 4, 2012) § 3, com. e., p. 29.)

In sum, the consensus of other jurisdictions and of the 

Restatement cuts against Alvarez and similar decisions. 

Logic points to the same conclusion: “it is strange to impose a 

negligence duty on lenders to carefully review modification 

applications when there is no such tort duty to approve applications 

as a result of that review.” (Carbajal v. Wells Fargo Bank, N.A.

(C.D.Cal. Apr. 10, 2015, CV 14-7851) 2015 U.S.Dist. Lexis 47918, p. 

*15, 2015 WL 2454054, p. *6, affd. (9th Cir. 2017) 697 Fed.Appx. 

555, original italics.)
16

Finally, the Gas Leak Cases opinion noted the ability of 

legislatures to craft remedies beyond the ken of courts. 

Legislatures, both state and federal, have responded to problems in 

the mortgage modification field. “[T]hrough the democratic process, 

the Legislature can bring to bear a mix of expertise while 

considering competing concerns to craft a solution in tune with 

public demands.” (Gas Leak Cases, supra, 7 Cal.5th at p. 413.) 

In the mortgage modification field, legislatures have been 

active, and their results have been designedly limited in time and 

scope. Neither legislators nor borrowers (nor others) want to 

increase mortgage costs or to limit the availability of mortgages and 

mortgage modifications. (Cf. Daniels, supra, 246 Cal.App.4th at p. 

1183 [absent a duty in the first place to modify a loan or even to 

evaluate such an application, imposing negligence liability for the 

mishandling of loan modification applications could discourage 

lenders from offering modification].) 

After fair notice, legislators can hear from disinterested 

experts and from all affected sectors before acting. After hearings 

and reports, legislatures can craft broadly acceptable compromises 

and can enact limited and experimental pilot programs. 

Legislatures can adjust policy swiftly in the face of change and 

experience.

Courts can do none of these things well. The complexity and 

importance of financial markets gives special force to the law of 

unintended consequences.

We conclude we should follow Lueras, not Alvarez. Under this 

view, the trial court properly dismissed Sheen’s negligence count 

because a lender does not owe a borrower a common law duty to 

offer, consider, or approve a loan modification. 

Sheen’s other claims are meritless. We agree with the trial 

court the intentional infliction of emotional distress claim is 
17

frivolous. Wells’s alleged responses to Sheen’s loan modification 

requests may have been confusing, confused, tardy, or flat wrong, 

but this alleged conduct was not so extreme as to exceed all bounds 

of what a civilized society usually tolerates. (Vasquez v. Franklin 

Management Real Estate Fund, Inc. (2013) 222 Cal.App.4th 819, 

832.) 

The trial court also was right to dismiss Sheen’s section 17200 

claim. (See, e.g., AMN Healthcare, Inc. v. Aya Healthcare Services, 

Inc. (2018) 28 Cal.App.5th 923, 950.) 

DISPOSITION

The judgment is affirmed. Wells is entitled to its costs on 

appeal.

WILEY, J.

WE CONCUR:

BIGELOW, P. J.

STRATTON, J.